View full sizeJohn Rigas, center, the founder of cable television giant Adelphia Communications Corp., leaves federal court in Manhattan, Wednesday, July 24, 2002, in New York, after his arraignment on securities and wire fraud. (AP Photo/Robert Mecea)

Ten years ago today — on March 27, 2002 — a single question brought down a business empire.

No one saw it coming: not the executives at Adelphia Communications, the country’s fifth-largest cable company; not the independent auditors; not the corporate lawyers; not even the man who asked the question.

Oren Cohen, then a Wall Street analyst for Merrill Lynch, waited until the end of Adelphia’s quarterly conference call with investors to ask his question: “About that $2.3 billion in off-balance-sheet debt listed in your footnote.”

The scandal at Enron had been headline news for months.

President George W. Bush, who famously bestowed the nickname “Kenny Boy” on Enron’s CEO Ken Lay, was facing almost daily criticism for being chummy with fraudsters and doing nothing. Enron’s auditors, Arthur Andersen, had been indicted little more than a week earlier.

But few, if any, imagined a connection between the disgraced energy trading giant and cable TV.

Yet, in the wake of Enron, the Federal Accounting Standards Board had quietly issued new guidelines for disclosing off-the-books debt, and the Securities and Exchange Commission made technical changes, which combined made the accountants and lawyers at Adelphia’s headquarters in Potter County take a closer look at the complicated financial relationships between the corporation and its founding family, the Rigases.

Major banks had offered billions in loans that either side could draw upon.

In March, company officials added a footnote to the annual earnings release revealing that the Rigas family had taken out $2.3 billion in loans that Adelphia could be responsible for paying.

Cohen wanted to know what assets they had to back that up. What assurance could the Rigases give that Adelphia would not have to bail them out?

Cohen had been a skeptical follower of Adelphia and its founding family for years. He was familiar with the Byzantine intermingling of public and private businesses, but he had no idea what his question had just unleashed.

The company’s chief financial officer, middle son Tim Rigas, and the vice president of finance, Jim Brown, fumbled for a response.

They said they’d get back to Cohen. Then there was silence, week after week, as the company’s stock price plunged.

By mid-May, the Rigases had resigned.

By mid-June, independent directors of the board were accusing them of fraud and preparing to take the company into bankruptcy.

By mid-July, the federal government was poised to set an example.

John Rigas, 77 years old at the time, was the first CEO to be walked in front of the cameras, charged with conspiracy and fraud. Two years later, he and son Tim were convicted in federal court in Manhattan.

Ironically, the news was overshadowed by the indictment the day before of “Kenny Boy.”

Today, Oren Cohen is a founding partner at Pinebank Asset Management in New York, which manages a hedge fund specializing in distressed corporate bonds and loans.

His former firms — Merrill Lynch and Bear Stearns — no longer exist.

They were bought out, along with other banks allegedly defrauded by the Rigases, during the banking scandal and resulting financial crisis of 2008.

It’s not as easy today as it was 10 years ago to view big banks as victims.

No bankers testified at the Rigas trial; there was evidence they largely knew what had been going on. No auditors testified. No company lawyers.

The star witness was Brown, the former director of finance, who admitted orchestrating much of the alleged fraud.

A decade after he and Tim Rigas stumbled for an answer to Cohen, Brown remains free.

Although he pleaded guilty to conspiracy and fraud late in 2002, he has yet to be sentenced. Brown could not be reached for comment.

John and Tim Rigas, now serving 12- and 17-year sentences, respectively, at Allenwood, declined to be interviewed for this story. Neither man admits wrongdoing.

Their attorney, Larry McMichael, continues to fight in federal court for their release. He calls what happened “overzealous prosecution.”

On Monday, McMichael pointed to last week’s plea bargain and sentence of defrocked Philadelphia priest Edward Avery. “He gets 2½ years in jail for raping a 10-year-old,” McMichael said, “while John Rigas is sitting in jail for what amounts to a life sentence because he got bad advice from accountants and lawyers.

“It’s completely screwed up,” he said.

McMichael has filed a habeas corpus motion with the court based on evidence withheld by the prosecution at the time of the trial. Appeals have been exhausted.

“The Bush administration found a great opportunity to prove they were tough on crime by picking up a couple of guys from Coudersport nobody had ever heard of and treating them like war criminals,” McMichael said.

Auditors, lawyers and independent board members — all of whom said the 2002 audit was “the best ever” before the Oren Cohen conference call — all backed off and clammed up.

“When the government makes it impossible for people to defend themselves, convictions become a self-fulfilling prophesy,” said McMichael.

After the convictions, the government filed additional charges against the Rigases for tax evasion.

Recently, those charges were withdrawn.

The judge in the case quoted a Kenny Rogers song, saying “The government has appropriately decided to fold ’em, and has blessedly elected to end this aspect of the unfortunate Rigas saga.”

The judge said it had become “increasingly clear” to him that the case was “a highly questionable use of the increasingly scarce resources of the federal government.”

The Rigas family still lives in Coudersport and still runs a cable company.

After the trial, all but two of the family’s private cable systems were surrendered to the government and sold. The remaining two served about 4,000 people in three small towns in the northern tier.

In the past six years, sons James and Michael and a small team of former Adelphia employees have built those into a new company with 35,000 subscribers in 12 states.

Some of the company’s profit helps pay the lawyers.

“It’s been hard to both continue to fight the unlimited resources of the government and try to develop the business,” said James. “We’ve been able to keep the battle going, but it’s been a rationed battle.”

The company’s name, Zito Media, draws on their father’s native Greek.

Loosely translated, it means “new life.”

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